The purpose behind the
federal Truth in Lending Act is to help
ensure that consumers applying for a loan
or credit card are informed of certain
The law applies when a
lender who regularly extends credit offers
a consumer open-ended credit, such as a
credit card, or closed-end credit.
Closed-end credit is normally an agreement
to pay for a purchase in the future, where
there is either a finance charge or more
than four payments. A common example is a
"buy here, pay here" car loan.
For most consumer loans
under $25,000, the lender must provide, in
a conspicuous manner, the following
- The amount financed
- This is the amount of credit the
lender is extending.
- The finance charge
- This is the amount the credit will
cost. Usually the biggest part of the
finance charge is interest.
- The interest rate, expressed as an
Annual Percentage Rate (APR)
- The APR must be calculated according
to certain formulas.
- The total of payments
- This is the total amount the consumer
will pay over the course of the loan,
including both the amount financed and
the finance charge.
- The payment schedule
- This is a description of when the
payments must be made, and the amount of
- Any security interest the lender will
obtain in the consumer's property
- Examples include a mortgage or a lien
on an automobile.
These disclosures, if
required, must be provided to the consumer
in a form he or she can keep, before the
consumer signs the loan agreement.
If any required
information is left out or inaccurate,
beyond a small allowable margin of error,
the consumer may be entitled to damages
from the lender. If a consumer has been
damaged by the violations, she or he can
recover those actual damages. Also, the
consumer may be able to recover statutory
damages of two times the finance charge,
with a minimum of $100 and a maximum of
$1,000. If the consumer is successful in
the lawsuit, the lender may have to pay
the consumer's attorney fees.
businesses will "hide" a finance charge,
or disclose an APR that is inaccurate. If
one disclosure is wrong, often other
information is wrong as well. If you are
unsure about information on your consumer
finance agreement, contact an attorney.
Keep in mind that this is just general
information about the Truth in Lending
Act. There is much more to this area of
the law. If you have a specific legal
problem, or if you think you have a case,
contact an attorney to see if she or he
can represent you.
There are other laws
designed to protect people from particular
wrongful business practices.
Here are a few:
Debt Collection (FDCPA)